In the past, each credit card was marketed to everyone in the same way, using the same application documents and offering the same terms. Since many recipients ignored the applications or applied and were denied, the credit issuers had to send out hundreds, or even thousands, of applications at a time in order to generate a few new customers. Also, many recipients who intended to apply abandoned the process at some point between receiving their offers (applications) and actually receiving their cards.
In order to save money, the credit issuers began to use demographic information to target their mailings toward people it expected to be profitable (for example, people who would respond and/or people whose applications would be approved). The issuers also created multiple credit cards, which differed in their terms or associated fringe benefits and which could be marketed to different people. These targeted marketing techniques resulted in a higher yield in terms of both response rate and approval rate.
However, offer recipients were still reluctant to apply, since they didn't want to spend time filling out applications only to be denied later on. In response, the issuers began prescreening people for credit card offers. The issuers would obtain a person's credit data and determine whether it met their lending criteria. If it did, the person would be pre-approved, and the offer that she received would so indicate. Thus, a recipient could distinguish between an offer that had been prescreened and one that had not (commonly referred to as an invitation to apply or “ITA”). While prescreening increases the yield, it is used sparingly due to the cost of obtaining data from credit bureaus.
Another advance in credit card marketing is a decrease in the time it takes to review an application and render a decision of approval or denial. Initially, paper applications submitted by mail, and decisions were made in a matter of weeks or months. Then, applications were submitted electronically, and decisions were made in days or weeks. Now, information systems and technology have advanced to the point where a credit decision can be made in a matter of minutes or even seconds.
This real-time decisioning means that a customer can apply for credit and receive an answer almost instantly. “Instant credit decisioning” has been used in various situations, including at a point-of-sale (POS) or at a credit issuer's web site. In an effort to reach a wider audience, issuers have also partnered with third-party web sites to cross-sell their credit products. These websites can monitor their users in real-time and present offers to them according to their characteristics.
As this type of cross-selling becomes more common, several issues will arise. One is how to handle multiple offers, each of which can be presented to the user. Another is whether to prescreen a user in an attempt to present a pre-approved offer. How these issues are resolved will determine whether these cross-selling partnerships make financial sense for both the credit issuers and the third-party web sites.
What is needed are a method and a system that can determine which credit-based goods or services (if any) to market to a person.